Welcome back to our series on investment strategies, where today, we’re focusing on ‘On the Hunt for Top Stocks: The Sweet Spot in Investing.’ After our exploration of indexes and sectors, we delve into the core of successful investing: identifying top stocks.

Shares: Discovering the Sweet Spot

The ‘sweet spot’ in investing, much like the perfect position in a cycling peloton, represents the ideal point for holding strong stocks. Not trailing at the back nor struggling against the headwinds at the front, but perfectly positioned for growth with minimal effort.

My earlier conclusions of 2023 “The S&P500 stock market index remains strong – especially large companies – investing in technology” are still a smart move.
For that reason, I remain focused on technology.

Technology does represent a large sector with a subdivision into sub-sectors such as:

• Semiconductors
• Computer services
• Internet
• Software
• Hardware
• …

Technology’s Leading Edge: NVDA, the sweet spot of the market.

My earlier conclusions of 2023 on the strength of the S&P500, especially within technology, hold true. Within this vast sector, semiconductors, led by Nvidia (NVDA), showcase the essence of finding top stocks in the sweet spot of the market.

Recall the importance of the U.S. stock Nvidia. This stock was also frequently cited during the Webinars: because this is the stock to follow.
This is the sweet spot: this is the stock to measure the mood on Nasdaq!
And this stock is still leader (and semiconductor!) in the upward cycle since October 2022.

From previous contributions, you know that using relative strength, you can compare indexes and sectors. This is also important with stocks.
And with stocks, it is equally important to analyze the different periods of 1 value.
Due to the large number of curves, this is not always simple via relative strength.

For that reason, during this contribution you will learn more about the unique quadrant analysis.

Quadrant Analysis: The Art of Timing Your Investments

Through quadrant analysis, we uncover the art of timing in investing, particularly with Nvidia. This method helps pinpoint the ‘sweet spot’ for entry, highlighting why NVDA remains a leader in the semiconductor space.

You place the stock in a chart without averages and indicators.
Then, at different periods, you check the relationship of the most recent closing price versus the highest and lowest price of the chosen period.
Do this for example at 1 month, 6 months, 2 years and 4 years.
That way you can clearly see the trend of the stock for the chosen period.

The quadrant analysis at Nvidia over 1 month, 6 months, 2 years and 4 years

The quadrant analysis offers you two benefits:

• It helps you determine the trend.
• It shows you the ideal entry points.

Stocks in the fourth quadrant (red) are generally to be avoided. You prefer stocks within the green quadrant or stocks that move quickly from red to green.

Quadrant Analysis: In Practice

The chart above shows the four quadrants at Nvidia. Each quadrant has a distinct color.
At Nvidia, the most recent share prices for all periods are at top level in the green quadrant: this means strength!

NVDA is active in AI and blockchain, while industry peers develop specific chips for desktops or the automotive industry, for example. I am thinking here of our Belgian gem Melexis and then point out the importance of momentum in combination with the quadrant analysis.

Momentum Analysis Measuring the Pulse of Potential Growth

Momentum is an essential factor

If you observe a movement from lower to higher positions within the quadrants, this is a positive sign for potential growth.
So for this reason, the second and third quadrants are also at least to be followed.

In addition to quadrant analysis, momentum plays a critical role. For example, Melexis transition from the yellow to the green quadrant over a 4-year period exemplifies potential growth, underscoring the importance of selecting stocks with strong momentum within the right sectors.

Conclusion: Focus on Strong Stocks

The key to successful investing lies in pinpointing stocks that consistently perform well, particularly those residing in the green quadrant. While sector choice matters, the true ‘sweet spot’ involves identifying the strongest stocks within those sectors, such as NVDA in technology and semiconductors.